Over the course of the last 36 months, I've built up quite a reputation for being quite the dividend fanatic. If it's not the incessant whispering from retired folk every time I walk by my local Fidelity office, it's my dad politely asking me to "please pass the dividends... umm, I mean, mashed potatoes." Come on guys, it's getting a bit old. Really.
I suppose this shouldn't come as a surprise, though, since my taxable account contains 25 holdings, 24 of which pay a consistent dividend. The other is Apple (AAPL), which I likely would have sold already without the inevitable announcement it would begin sharing some of its cash hoard with me in the form of a dividend in the near future. Nearly half of my net worth is stashed away in dividend stocks and I don't see this number decreasing anytime soon. The feeling from receiving that glorious dividend, which Kraft (KFT) dished out to me this morning, somehow sets my heart at ease. Lately, though, I've found another investment that's been frequenting my thoughts as well, challenging the idea dividends might be the best thing since sliced bread: single family housing.
Warren Buffett appeared on CNBC late February and eloquently stated he would buy up a couple hundred thousand single family homes had it been practical for him to do so. I generally do not disagree with Buffett on most things and we're certainly on the same page with respect to our ideas about housing as well. Quite frankly, I think buying a home looks like a pretty great idea at the moment -- depending where you live, of course.
Here in San Diego, it's safe to say we were hit hard when the housing bubble struck. Most houses in my town lost about half of their value and there are considerable deals to be found nearly everywhere with no shortage of inventory, especially if you're in the market for repossessed homes. Truthfully, it's hard to beat a 3.75% interest rate with a 30-year fixed payment, am I right? Especially since the average YOC in my dividend portfolio is above 4% and that's not including capital appreciation. It's also not a stretch to assume these are the best interest rates a young guy like me will ever have access to. And they're not going to stay at this attractive rate forever. Just like Buffett, when you see a great opportunity, you don't hesitate and you go for it.
I know buying a house may not be the best investment for everyone in every part of the country. Maybe your credit score is less than perfect or coming up with a down payment is not an option. But with interest rates at historical lows and housing prices at about half of what they were just a few short years ago in my neck of the woods, it's difficult to argue we won't see a brighter side of the housing market over the next decade or two once unemployment turns around and this economic recovery gets back on its feet.
I'm not eliminating the possibility that I could be wrong. Housing prices could continue to slide, we could see another recession and -- although interest rates probably can't go any lower -- perhaps better investments might present themselves in the future. For now, however, I'm perfectly content with diversifying my assets, contributing less fresh capital to dividend stocks while looking into purchasing my first home. At the very least, it'll give me another location to continue writing articles for you, the intelligent and versed Seeking Alpha community.
Think I'm wrong? Think buying homes is a bad idea? I'm not so arrogant to think my opinion is always correct; feel free to let me know in the comment section below.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.